AIG sells 14% stake in AIA to help repay bailout

American International Group

, the 77% U.S. government owned insurer, is selling a 14% stake in AIA Group (HKSE: 1299.HK) to pay back its debt to the government. About 1.7 billion AIA shares are offered by New York-based AIG for HK$27.15-27.50, up to 7% less than Friday's closing price. AIG will raise $6 billion. The money will be used to pay back some of the $182.3 billion dollar bailout the insurer received at the start of the financial crisis in 2008. Most of the money the company originally received went to paying back large banks. The company still owed $50 billion at the end of last year. AIA's new business growth increased 40% last year, according to a Hong Kong-based analyst at CCB International Securities, good timing for AIG's sale of additional shares. AIA's shares have risen 27% since the company was listed in a $20.5 billion IPO in October 2010. It was Asia's third largest public listing as AIG sold two-thirds of the company. The sale may be a benefit for AIG and AIA. As AIA becomes more publicly owned it could be a target for fund managers tracking the Hang Seng and Hang Seng Finance Indexes. It will also become more free-floating, weighing more on benchmarks. The move will decrease long-term overhang, even though it may drive down share prices in the short-term. The sale will also reduce swings in quarterly earnings for AIG. When AIG recorded a $4.11 billion third-quarter loss in November, $2.3 billion was from a decline in the value of AIA shares, which are marked to market price. Then in February AIG gained $1 billion based on AIA market prices for the year. AIG will not sell its remaining shares for 180 days, the insurer said in a sales document. The company has not decided if it will sell more shares or not. AIG owned 33 percent of AIA, or about 3.96 billion shares, according to a report from AIA on May 31. The U.S. Treasury has been selling back shares of AIG as the stock raises higher than the $28.72 share price needed for the government to break even on its investment. The U.S. Treasury sold 200 million AIG shares for $29 each on May 24. AIG has sold more than $50 billion of assets to repay the government's funds. The company was selling assets more quickly before Robert Benmosche became chief executive officer in 2009. Since Benmosche's appointment the insurer has sold Nan Shan Life Insurance, in Taiwan, for $2.16 billion, and American Life Insurance, now owned by MetLife

, for about $16 billion. AIG shares have climbed 28% this year thorough the close of the trading day Friday after the company reported fourth-quarter profit of $19.8 billion from a tax benefit. The stock last closed above $28.72 a share, the government's break-even price, on Feb. 28.